Brad M. Reiss v. Societe Centrale Du Groupe Des Assurances Nationales, A/K/A Societe Centrale Du Gan, N/k/a Societe De Gestion De Garanties Et De Participations, and Gan S.A., Union Pour Le Financement D'Immeubles De Societes and Union Industrielle De Credit
Docket: 2000
Court: Court of Appeals for the Second Circuit; December 26, 2000; Federal Appellate Court
Brad M. Reiss appeals a judgment from the United States District Court for the Southern District of New York, which dismissed his action to recover a finder's fee. Reiss claims entitlement to a 1% commission for facilitating the interest of General Electric Capital Corporation (GECC) in acquiring two French real estate companies, Union Pour le Financement d'Immeubles de Societes (UIS) and Union Industrielle de Credit (UIC). He asserts that he entered into an oral contract with Alain Juliard, Chairperson of UIS, for this fee. The district court dismissed the case for lack of personal jurisdiction and failure to state a claim, concluding that Reiss failed to show that the defendants transacted business in New York or that Juliard had authority to contract on their behalf. Reiss, a licensed real estate broker with over 15 years of experience, alleged breaches of contract and quantum meruit. At the time of the dispute, UIC was a financial institution with a significant real estate portfolio, while the defendant Societe Centrale du Groupe des Assurances Nationales, a government-owned entity in France, was linked to GAN S.A., a holding company that owned UIS and UIC. The court's judgment was vacated and remanded in part for further proceedings.
Reiss, a New York resident, has maintained a nearly twenty-year personal and professional relationship with Alain Juliard, Chairperson of UIS. In April 1992, representing United States Surgical Corporation (USSC), Reiss facilitated UIS’s provision of approximately 483,910,000 French francs in financing for USSC's European headquarters and training facility near Paris, expecting a 1% fee for his firm, Sonnenblick Goldman. Juliard assisted in collecting this fee. During a July 1992 visit to New York, Juliard informed Reiss that "GAN" had authorized him to explore reducing its real estate holdings in France, specifically in UIS and FINABAIL. Juliard emphasized the need for GAN’s approval before taking significant actions.
Subsequently, an oral agreement was made between Juliard and Reiss, wherein Reiss would seek U.S. corporations to engage with defendants regarding their holdings. In return, he would receive a 1% fee on any successful large transactions. Reiss initiated efforts that led to GECC's eventual acquisition of UIC and UIS, starting with outreach to Richard Grimaldi from GECC's Real Estate Division to gauge interest in the French market. Juliard and Rosio, in collaboration with Reiss, aimed to have GECC acquire GAN's shares in FINABAIL to pave the way for further investments. Following a suggestion from Grimaldi, Reiss and Rosio prepared a written presentation for GECC and delivered it to Grimaldi, along with UIS's annual report. Reiss also contacted around 200 other American companies to promote Groupe Percier's investment opportunities.
In July 1993, Reiss joined Allied Partners, Inc., a firm focused on real estate management and investment. Following interest from GECC, Reiss organized a meeting in September 1993 with key individuals, including Juliard and Rosio, to discuss a potential acquisition of UIC by GECC, as indicated by Juliard's communication with "GAN." Juliard stated that "GAN" was eager for GECC to consider acquiring UIC, either for its own use or as a means to acquire UIS, and tasked Reiss with generating GECC's interest.
Subsequently, Reiss and Juliard agreed to operate under the name "Groupe Percier Allied Partners," with Reiss’s New York office as the registered address. Juliard and Rosio claimed to have obtained "GAN's" approval for this arrangement and authorized Reiss to open a bank account for the joint entity, which he did at Chase Manhattan Bank.
Between October 1993 and March 1994, discussions occurred between defendants and GECC regarding the potential acquisition of UIC and/or UIS stock, with Reiss receiving updates and correspondence from Juliard and Rosio. In April 1994, GECC signed confidentiality agreements regarding UIS and UIC, which had "GAN's" approval. Juliard and Rosio instructed Reiss to seek additional investors and provided him with UIS dividend data.
Reiss participated in significant meetings, including one on June 1, 1994, with GECC officials and another on September 13, 1994, in Paris, where potential investments in UIS and UIC were discussed. Further, in July 1994, he was involved in discussions regarding a joint investment with GECC in Silic and was encouraged by Rosio to present UIC's assets during this trip. In September 1995, Reiss accompanied GECC representatives to review a potential acquisition related to Barclays Bank. Additionally, in the fall of 1995, he collaborated with Rosio to prepare a study on the French real estate market for GECC.
Reiss maintained ongoing communication with Grimaldi, Juliard, and Rosio from 1993 until February 1997, focusing on securing GECC's interest in UIS and UIC transactions while exclusively representing the defendants. In mid-1996, anticipating GECC's potential acquisition, Reiss facilitated a meeting between Juliard, Rosio, and legal counsel in New York. On July 25, 1996, during that visit, Rosio acknowledged Reiss's entitlement to a fee contingent upon the deal's completion.
In February 1997, "GAN" announced a restructuring plan to sell its interests in UIS and UIC, which received approval in July 1997. Following French law, "GAN" engaged Lazard Freres as a financial advisor to manage the sale process. Starting in July 1997, at Juliard's request, Reiss reached out to potential investors and successfully attracted interest from The Blackstone Group, which sought confirmation that the defendants would pay Reiss's fee. On September 17, 1997, Reiss confirmed his fee entitlement of 1% if UIS entered into a deal with Blackstone. Although Rosio initially attempted to shift payment responsibility to Blackstone, Juliard and Rosio ultimately agreed that the defendants were responsible for Reiss's fee, acknowledging his long-standing representation of UIS.
In late 1997, Grimaldi informed Reiss of GECC's agreement to acquire UIS, prompting Reiss to send a $1 million invoice to Juliard, Rosio, and GECC executives on January 7, 1998. Juliard acknowledged Reiss's initial introduction but contended that his involvement was limited to that and denied any fee owed for the GECC/UIS transaction. The Amended Complaint states that on May 29, 1998, GECC acquired UIS for approximately $750 million, and on June 15, 1998, entered a joint venture with Goldman Sachs/Whitehall Partners to acquire UIC for about $350 million, with Reiss receiving no fees from either transaction.
Reiss subsequently filed a lawsuit on November 20, 1998, in the Southern District of New York against UIS, UIC, and Groupe des Assurances Nationales for breach of contract, quantum meruit, and seeking at least $11 million in damages. He later filed an Amended Complaint on January 29, 1999, dropping the unjust enrichment claim and replacing the non-existent Groupe des Assurances Nationales with Societe and GAN S.A.
Reiss claimed breach of contract against the defendants, alleging an agreement to retain him as a finder for a fee of 1% of large transaction values, asserting he had fulfilled his obligations and was entitled to compensation following a transaction with GECC. Additionally, he brought a quantum meruit claim, stating the defendants authorized him to provide valuable services, from which they benefitted, expecting to be compensated. The defendants—UIC, Societe, and GAN S.A.—moved to dismiss the claim, arguing lack of personal jurisdiction and failure to state a valid claim. The district court held a conference to examine relevant deposition excerpts before considering the motion. Ultimately, the court dismissed the Amended Complaint against the non-UIS Defendants, concluding that Reiss did not establish personal jurisdiction under New York's long-arm statute, as he failed to show that Juliard had authority to act for them. The court noted that for jurisdiction under section 301 of the New York Civil Practice Law, a foreign corporation must conduct business in New York continuously and systematically. Reiss did not allege that the non-UIS Defendants had a physical presence or personnel in New York, nor did he provide sufficient evidence linking the defendants to their subsidiaries. Thus, the court rejected the personal jurisdiction argument based on subsidiary activities, finding no agency relationship established.
Jurisdiction under section 302 requires that a plaintiff's cause of action arises from business transacted in New York. The district court assessed whether the non-UIS Defendants had purposefully engaged in business activities within the state. It noted that Reiss's only interaction with these defendants was a meeting with Guy de Chavanne in France. The court found Reiss did not provide sufficient evidence to establish that the non-UIS Defendants authorized him to enter into a finder's fee agreement through Juliard. Although Reiss argued Juliard had actual authority, the Amended Complaint failed to differentiate among GAN entities, merely identifying "GAN" as the authorizing entity.
The court determined it would violate due process to allow a lawsuit against multiple foreign defendants with no New York presence to ascertain Juliard's agency status and the extent of his authority. Consequently, the court dismissed the case for insufficient pleading to demonstrate that Juliard had either actual or apparent authority to make an oral finder's fee agreement with Reiss. Reiss's claim of actual authority was based on Juliard’s representation of being authorized by "GAN" to find a buyer, which the court rejected, emphasizing that an agent cannot self-appoint authority without evidence of the principal's affirmative acts. Additionally, the court noted the lack of any claim that "GAN" authorized Juliard to hire a finder.
For apparent authority, the court stated that a principal must clearly communicate an agent's authority to a third party, which Reiss failed to demonstrate. Although Reiss claimed Juliard had both express and implied authority, the court pointed out the absence of any communication between Reiss and representatives of the non-UIS Defendants. Furthermore, activities following the alleged agreement, such as "GAN" approving the use of a name and reviewing a confidentiality agreement, did not support Juliard's authority to enter into the finder's fee agreement.
The motion to dismiss was denied for UIS, chaired by Juliard, but granted for GAN, S.A., Societe, and UIC. Reiss' request to add two more defendants related to GAN was also denied. The district court indicated that Reiss could amend the Amended Complaint if he found facts showing that the dismissed defendants authorized Juliard to enter into a finder's fee agreement. No further applications to amend were made by Reiss, as indicated by the docket, which recorded a Stipulation and Order dismissing UIS and UIC on January 27, 2000. Reiss filed a Notice of Appeal on February 2, 2000, regarding the July 29, 1999 Order that dismissed claims against GAN S.A. and Societe, claiming it became appealable on January 24, 2000, the date the Stipulation was ordered.
A critical issue arose regarding the appellate jurisdiction since no final judgment had been entered. The Notice of Appeal referenced an Opinion and Order from July 29, 1999, which would be untimely if a final judgment had been entered that day. The Opinion and Order did not constitute an appealable final judgment as it did not resolve all claims against UIS and allowed for further amendments. Furthermore, it did not comply with Federal Rule of Civil Procedure 58, which requires judgments to be set forth in a separate document.
Reiss appeared to intend to appeal from a final judgment implied to have occurred on January 24, 2000, after the dismissal of UIS and UIC, leaving only Societe and GAN S.A. as defendants. Despite procedural irregularities, the court agreed that Reiss' appeal was timely based on the contention that the Opinion and Order became an appealable final judgment upon the dismissal of UIC and UIS.
The Order dismissing the action against UIS and UIC, coupled with Reiss' presumed waiver of his right to further amend the Amended Complaint, is treated as a final judgment favoring Societe and GAN S.A. as of January 27, 2000. A final judgment concludes litigation with no unresolved issues among the parties, as established in MacEwen Petroleum, Inc. v. Tarbell. The absence of a formal judgment before the Notice of Appeal does not impact the appeal's timeliness, since such notices are considered filed upon the entry of the relevant judgment or order per Federal Rule of Appellate Procedure 4(a)(2). The filing of a formal judgment can occur at any time, and the appellees' lack of objection to the appeal waives the requirement for a separate document under Federal Rule of Civil Procedure 58.
The case then shifts focus to jurisdiction concerning Societe and GAN S.A. The key issue is whether there is subject matter jurisdiction under the Foreign Sovereign Immunities Act of 1976 (FSIA), rather than personal jurisdiction as defined by New York law. Under the FSIA, personal jurisdiction is only valid when paired with subject matter jurisdiction and proper service of process, neither of which has been challenged in this instance. The FSIA exclusively governs jurisdiction over foreign states in federal courts. Societe and GAN S.A. qualify as foreign states under the FSIA. While foreign states are generally immune from U.S. jurisdiction, certain exceptions exist, with the "commercial activity" exception being the only relevant defense available to Reiss. This exception allows for jurisdiction in cases based on commercial activities conducted by the foreign state within the U.S. or related actions that have direct effects in the U.S.
Reiss' legal action is predicated on an exception related to "commercial activity carried on in the United States" by foreign entities, specifically Societe and/or GAN S.A., as defined under the Foreign Sovereign Immunities Act (FSIA). The Supreme Court mandates that any action must be "based upon" significant commercial activity by the defendant that has substantial ties to the U.S. This requires a "significant nexus" between the commercial activity in question and the plaintiff's cause of action. Reiss claims this nexus exists through his role as a marketing agent for Societe and/or GAN S.A. in connection with the sale of UIC and UIS to GECC.
The district court prematurely determined that Reiss did not demonstrate sufficient evidence of Societe and/or GAN S.A.'s continuous business operations in New York or that they conducted transactions relevant to Reiss’ engagement. However, the Amended Complaint and Reiss’ deposition suggest dealings with Juliard, UIS’ chairperson, who may have acted on behalf of Societe and/or GAN S.A. Reiss alleges that he was hired by Juliard for services that benefitted Societe and/or GAN S.A., establishing potential liability.
The court noted that depositions from Juliard and de Chavanne, the Director General of both Societe and GAN S.A., are necessary for a comprehensive FSIA jurisdiction analysis. Reiss has been authorized to pursue discovery from these individuals, and the court emphasized the need for a hearing on jurisdictional facts, allowing both parties to present evidence and resolve disputed matters with findings of fact.
Juliard's authority to act for Societe and/or GAN S.A. in dealings with Reiss is closely linked to FSIA jurisdiction. Establishing a connection between Societe's and/or GAN S.A.'s commercial activity in the U.S. and Reiss' claim for a finder's fee necessitates determining Juliard's actual or apparent authority. The Amended Complaint claims breach of contract and quantum meruit against Societe and/or GAN S.A. Actual authority arises from direct communications from the principal, while apparent authority is based on the principal's conduct that leads a third party to believe the agent has the authority to act. The Amended Complaint provides detailed accounts of services Reiss performed at Juliard's request, including various meetings and communications related to real estate activities. The determination of whether these services were authorized by Societe and/or GAN S.A., and if they were indeed performed, is contingent on resolving FSIA jurisdiction. The district court's judgment dismissing the Amended Complaint is vacated, and the case is remanded for further proceedings. Notably, Reiss does not differentiate between GAN S.A. and Societe in the Amended Complaint. Additionally, issues regarding the Statute of Frauds concerning an oral contract for a broker's fee are not part of this appeal, and UIS and UIC are not involved in this appeal.
